GAO Proposes Controls Remedies to FDIC

''Although these issues were not material in relation to the financial statements, we believe they warrant management's attention,'' wrote the GAO.

The Government Accountability Office (GAO), which had previously found several internal control issues that affected the Federal Deposit Insurance Corp.’s accounting for the funds it administers, has issued several recommendations for how the FDIC can improve its accounting procedures and internal controls.

The GAO added that implementing these recommendations would strengthen the FDIC’s conformance with the internal-control standards that federal agencies are required to follow. “Although these issues were not material in relation to the financial statements, we believe they warrant management’s attention,” the GAO wrote in a letter to Steven O. App, deputy to the chairman and chief financial officer of the FDIC.

The GAO had found the following:

• The FDIC made errors in calculations supporting its allowance for losses on receivables from thrift resolutions. These errors would have led to misstatements in the financial statements of the Savings Association Insurance Fund and the FSLIC Resolution Fund.

The GAO recommended that the FDIC remind individuals who review asset valuations to adhere to the Standard Asset Valuation Estimation methodology.

• The FDIC did not have effective compensating controls in place to ensure the accuracy of pay computations related to the National Finance Center’s Thrift Savings Plan. Other payroll expenses could have been misstated in the funds’ financial statements.

On the GAO’s recommendation, the Division of Administration’s Human Resources Branch at FDIC has reviewed existing compensating controls and determined that additional controls are not warranted at this time. The GAO added that it will “continue to review the effectiveness of FDIC’s compensating controls…as part of our 2005 financial audit.”

• The FDIC did not detect billing errors made by a contractor, resulting in overpayments. The lack of effective invoice-review procedures increased the risk of overcharges for goods and services, as well as the possibility that they may not be detected and recovered.

The GAO recommended that the FDIC remind individuals who review and approve invoices of their responsibility to compare each invoice to the terms of the contract prior to approving the invoice for payment.

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